Buying Cheaper Than Renting, But Some Mortgages Make It a Closer Call
Jed Kolko, Chief Economist October 15th, 2014
Nationally, buying is 38% cheaper than renting with a traditional 20% down, 30-year mortgage. Buying is an even better deal with a 15-year mortgage, but not as favorable with less money down.
Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas. In fact, buying is 38% cheaper than renting now, compared with 35% cheaper than renting one year ago. Why is the gap widening? Two reasons. First, in the past year, the 30-year fixed-rate mortgage rate has fallen from 4.8% to 4.3% (3.779 APR-contact CHUCK). Second, rents have risen faster than prices, excluding foreclosures. Together, these trends have made buying even more affordable versus renting than it was last year.